Long bonds most likely to outperform

By Steven Hay, investment manager fixed interest at Scottish Widows The last quarter of 2001 saw enormous volatility in overseas bond markets. While there is always increased uncertainty surrounding bond yields around turning points in the economy, the volatility of recent moves in the US 10-year yield, for example, has risen to levels seen only once since 1988. To illustrate, 10-year US yields fell from 5% in early September to 4.2% on 7 November before rising back to 5.15% in January. We have been expecting US growth in 2002 to be stronger than consensus estimates, although w...